On July 25th, the Legislative Interim “Electric Services in an Annexed Area” Committee met to hear public testimony on what will likely be one of the hottest issues in the 2020 Legislative session.. and possibly beyond.
During this hearing, both sides gave presentations to the committee, which you can find here. However, for purposes of discussion, I wanted to highlight the presentations from the two sides which are teeing up to square off this next session.
First, the presentation from the big dog in the fight, SDREA’s, who are trying to portray themselves as being preyed upon by municipalities, losing revenue as a result, and are seeking to protect their territories, at the same time they loan millions to others:
DESA07252019-A by Pat Powers on Scribd
Next, the presentation from the Coalition to Preserve Consumer Choice, the David to the SDREA’s Goliath, representing Heartland Power, Missouri River Energy Services, and the SD Municipal Electric Association, which gives more of a policy discussion:
Des a 07252019 by Pat Powers on Scribd
Take a look, and feel free to share your thoughts in the comment section.
And while you’re pondering that, I’d bring up something raised in the Coalition’s presentation, particularly a couple of points that I was unaware of (Page 28):
So, according to the Municipal Utilities Presentation, REA territories are authorized by South Dakota statute, BUT aren’t subject to open meeting laws, and aren’t subject to open record laws. AND, while they’re authorized by South Dakota statute, and encompass far, far more area than organizations such as IOU’s (Investor Owned Utilities), the Rural Electric Cooperative aren’t subject to rate oversight by the Public Utilities Commission?
To me, those are two points which kind of beg the question, “Why not?”
If the REA’s want the Legislature to open the can of worms on whether or not cities are allowed to grow without their blessing, it sounds as if the Legislature should be compelled to ask “why under state law REA’s get to compete on an unbalanced playing field?”
The floor is yours.
Someone can correct me if I am wrong. A number of years ago, didn’t the PUC and Legislature designate boundaries for IOUs, REA, and municipalities? I seem to remember a battle up near Aberdeen between NWPS and Northern Electric for territory near Aberdeen that the city wanted to annex for an industrial park. I don’t remember the outcome for sure, but I think NWPS got to serve the territory even though Northern Electric lines were already in place. Anyone know for sure?
I consider this a taking of property. If the coop is there and it is capable of and willing to provide the service why should the city have the right to take the property and steal the revenue. This used to happened with school districts. As the city of Sioux Falls expanded they took property and revenue from the neighboring district. Legislation was passed ending the practice. There are now at least two other districts (Brandon and Harrisburg) within Sioux Falls city limits and it works. The same would hold true for electrical services.
Except it doesn’t work. And if you don’t believe that you can either wait 20 years to see it play out in Sioux Falls or see it right now in Omaha, Minneapolis, Kansas City, or Des Moines.
The city would still be expected to provide every other city service in the annexed area such as water, wastewater, sewer, street repair, street lighting, garbage service, police and fire protection, and on and on. So if you think of the school example it would be like attending one school for reading, math, English, art, history, gym, etc. and attending a completely different school for music class. The municipals serving electricity in annexed areas can be thought of like open enrollment. In all the examples the coops state of the municipals “taking” territory, the land owner or business owner actually asked the city to be annexed, just like a parent would ask for their child to attend a different school than the district they live in.
Are there any municipal.electrical utilities in West River or is this entirely an East River issue?
There are minincipal electrics west river, but very few.
When electric territories were created in the 70’s, the rules were that muni electrics could grow with the cities that own them. This has always been the rule and a condition of creating any territory. 50 years later a couple of east river REAs and East River Electric have decided they don’t like the rules under which they got protected territory, so they’re trying to TAKE that right away from 35 cities in South Dakota.
Landowners adjoining cities have been able to petition THE LANDOWNERS’ land into the city and the landowner had the right to access city power. REAs want to TAKE that right away fromLANDOWNERS
This is not a takings of any right from the REAs. A couple of east river REAs are whining about protecting a right they never had. Here’s an example for what they are doing. You petition the city for a street dance and to sell alcohol on Friday night and you get the permission, then you want to keep doing it every Friday night all summer. The local government says no, your right was for one Friday night, and then you accuse them of a taking because you want something more than the right you ever had said. Welcome to the kool aide of our summer study
That was an excellent explanation Lee. Thank you.
Mr. Schoenbeck’s analogy is unfairly leaning to one side. REA’s permit didn’t end. Friday night isn’t over until REA says it’s over.
A proper anaology would be two small towns legally sharing a stream for water. One town grows and grows and takes more and more water until the other small town, unable to grow or even maintain status quo, cries foul. The injured party (REA) must be compensated and the growth must be mitigated.
MoonBase
You might want to look at the math, I think some of it’s in those slides. The REAs, based on volume or dollars of sales or growth or anyway you want to score it, are huge compared to the munies. Also, the REAs don’t want to respect the territory the law has always protected for the much smaller munies. So in your analogy, the humongous entity (REA) is talking the water set aside for the littler entity (munies). That’s the facts Jack, even on the Moon 😃
I look at it from the standpoint of a land developer who is bringing in a housing development at the edge of town.. they may be asking for water and sewer from the city to be hooked up, but it’s possible that while they have all of their other utilities from the city, they may be stuck with a REA for power, when they don’t want to be.
I don’t know that Municipal growth should be held hostage, especially when the end consumer wants city services.
You make a good point, Pat.
A lasting solution needs to address the needs of the consumers, both urban and rural.
As members of a rural electric coop the customers are shareholders. They buy in to the coop with higher basic service fees and earn capital credits which are later returned to them. What happens to the members’ capital if a municipality takes over their service?
Under the law, the coop is paid for all of its physical assets. Since most of these are bare ground annexations, there’s little by way of assets. But, coops also get a percent of the cities income on the developed bare ground for seven years.
REA’s need a mix of customers while Munis only need the “easier to serve” customers. Town’s expansions take away what REA needs to stay solvent, which will cause REA to flounder, eventually.
Developers are happy with REA. There’s no detriment to selling houses with reliable REA power.
It’s analogous to private and charter schools who only accept the easier to teach kids while public schools must accept the kids with learning problems and disabilities.
There is a detriment when your power from the REA is priced higher than your neighbor’s municipal power across the street. The developers must not be happy with the REA power because they ask to be annexed into the city in order to receive all their services, including electricity. It will not bode well for economic development if we take that right away from them. The coops aren’t complaining about the annexations in small towns serving housing developments. They only seem concerned about the bigger cities and the large electric loads.
Members of the coop are not shareholders as the coops are non-profit entities. They do not buy into the coop, they are members. The municipalities are not taking over service of existing coop members. The vast majority of annexations are bare ground with absolutely no infrastructure in place. But, under current state law, the municipality must still reimburse the coop a percentage of revenue for 7 years even though the coop made zero investment at the site.
REAs should rethink their strategy and hope they don’t end up with less than they had before this discussion began. At some point, if you continue to push these communities around, they might just decide enough is enough.